Why low-income homes pay 5x more for clean heating, study finds

Lower-income households switching to clean heating could end up paying almost five times more out of pocket than higher-income families, according to The Cool Down, reporting on findings from the industry group ADE: Demand.

What the report found

The Cool Down reports that ADE: Demand looked at a typical smaller home facing a choice between two low-carbon heating options: a heat pump or a heat battery. The sticker prices were broadly similar — around £9,300 for the heat pump and £10,200 for the heat battery, per the report. The gap opens up once government grants are applied. After support, the household was left paying roughly £1,800 for the heat pump but about £7,700 for the heat battery — a difference of around £5,900, according to the report.

The report links this to housing type: The Cool Down notes that more than half of the lowest-income households live in flats or smaller homes, compared with fewer than one in five of the highest earners. Heat pumps are harder to fit in those homes because of limited outdoor space and planning or leasehold restrictions, the report says. It adds that the £1,800 heat pump contribution would equal just over a tenth of annual income (after housing costs) for a family in the second-lowest income bracket, while the £7,700 heat battery contribution would swallow nearly half of it. Renters are especially exposed: according to the report, close to two-thirds of social renters and 60% of private renters live in homes where a heat pump may not be practical.

ADE: Demand's head, Sarah Honan, was quoted putting it plainly: "Technical feasibility is only the first step; public policy must support households to install the heating solution that fits their home." The group is calling for heat-battery grants to rise to match the heat pump support on offer, for heat batteries to get the same VAT treatment, and for better modelling of what decarbonising flats and leasehold homes actually costs.

What the grants look like today

For UK homeowners who can fit a heat pump, the Boiler Upgrade Scheme currently covers £7,500 towards an air or ground source heat pump in England and Wales, provided the installer is MCS certified. In Scotland, the equivalent Home Energy Scotland grant offers up to £7,500, with an optional £7,500 interest-free loan on top. Heat pump installations also qualify for 0% VAT until 31 March 2027, rather than the usual 20%. Heat batteries, the technology at the centre of this report, don't currently sit inside that same package — which is the gap ADE: Demand wants ministers to close.

What it means for your costs

For households that can accommodate one, a heat pump remains the best-supported route to low-carbon heating. On our live cost model, a typical 8 kW air source heat pump runs £10,100 – £16,800 installed, with a mid-tier typical cost of £12,900, before the Boiler Upgrade Scheme grant and VAT relief are taken into account — both of which can cut the amount a homeowner actually pays substantially. Basic specifications start around £9,700, while premium systems reach £15,400. See our full Air source heat pump for how we build that estimate from labour hours and local installer rates, checked against real quotes.

The harder case is exactly the one the report highlights: flats, leasehold properties and rented homes where an outdoor heat pump unit isn't feasible. For those households, there currently isn't an equivalent grant-backed, like-for-like alternative in our cost model, which is part of why the funding gap described in the report matters — the support simply isn't following the housing types that most need it.

Whatever route you're considering, it's worth sense-checking any installer quote against typical local costs before signing — our "is my quote fair" quote checker tool is built for exactly that, and it's especially useful given how much of the final bill depends on which grants and VAT treatment actually apply to your property.

One practical takeaway from the report: before assuming a heat pump isn't an option, get a proper site survey. Flat roofs, communal gardens and even some balconies can sometimes take a compact unit, and an MCS-certified installer will be able to say definitively whether your property qualifies for the £7,500 Boiler Upgrade Scheme grant rather than ruling it out on assumption alone.